Originally Posted by nrandell
So for box 10a, I then need to reduce the basis of my property by that amount? How is that done exactly? The only property I own is a vehicle (original loan for 16,000, 1800 left to pay, and worth about 8000) and normal household furnishings, etc. I don't own any real estate or anything I would sell for a profit.
Input, on line 2 of 982, the total amount of forgiven debt you wish to exclude from income. Generally, this will be the amount reported to you on Form 1099-C.Input, on Part II the amount from line two onto line 10a, "Applied to reduce the basis of nondepreciable and depreciable property.Insolvency is calculated with FMV of assets.Tax attribute reduction (if there are no NOLs, capital losses, etc) is based on book value.For example a 10 year old car worth $3K, may have cost $25K. You use the $25K value in the attribute reductions. If you still come up negative after using cost bases, then you put $0 on 10a and explain in the attached statement that you have reached the reduction limit.
SO, If your total debts AFTER the cancelled debt EXCEED your total assets at their adjusted bases, then you have reached the debt reduction limit and the value for 10a would be $0.I guess you ned to contact a CPA/an IRSEA in your local area for mroe info in detail for your specific situation.
Note; you njeed to determine if the forgiveness of your debt is related to a qualifying event. Typically, the only qualifying reasons for the forgiveness of nonbusiness bad debts, such as credit card debt, are a Ch. 11 bankruptcy or declared insolvency of the taxpayer. If either of these two events do not apply, you may generally not file Form 982 for credit card debt forgiveness and must report the forgiven debt as ordinary income